Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion should be read in conjunction with our audited financial statements and accompanying notes thereto included in Item 8 of this Form 10-K (see Frequently Used Terms at the end of this Item 7 for certain definitions that may be used throughout this Form 10-K).
Unless otherwise specified, references to 2024, 2023 and 2022 are for the years ended December 31, 2024, December 31, 2023 and December 31, 2022, respectively.
Executive Summary
We are a global financial services company with operations in the Americas, Europe and Australia. Our primary business is the purchase, collection and management of portfolios of nonperforming loans.
2024 highlights
•Portfolio purchases of $1.4 billion, an increase of 22.0%.
•ERC of $7.5 billion at year-end, an increase of 16.6%.
•Cash collections of $1.9 billion, an increase of 12.5%.
•Net income attributable to PRA Group, Inc. of $70.6 million.
•Diluted earnings per share of $1.79.
The past year was one of the most transformational years in our nearly three-decade long history. In 2024, we expanded our senior leadership team, further differentiated our European business, strengthened our capital structure and delivered on our cash-generating and operational initiatives in the U.S, where improvements in our legal collections process helped drive 2024 U.S. legal collections of $376.0 million, an increase of 42.4% compared to the prior year. Additionally, we initiated the consolidation of our U.S. collection sites from six to three and expanded our use of third-party offshore collection agencies, resulting in offshore collectors representing more than 30.0% of our overall U.S. collector base as of December 31, 2024.
We continued to strengthen and expand our seller relationships globally in 2024, leveraging the diversification provided by our global portfolio. With strong execution, and by maintaining focus on our strategic pillars of optimizing investments, driving operational execution and managing expenses, we believe we are well positioned to sustain the momentum in 2025.
U.S.
Portfolio purchases were $795.8 million in the U.S. in 2024, an increase of 40.2% compared to 2023, and the second highest annual total in our history. We continued to capitalize on the strong levels of portfolio supply, driven by the growth in industry credit card balances, as well as elevated delinquency and charge-off rates, and pricing discipline has resulted in an expectation for improved returns on our investments.
During 2024, we implemented a wide range of enhancements in our U.S. call center operations. Within our legal collections channel, we focused on refining our processes, reducing cycle times and optimizing our post-judgment activities. Additionally, we launched a second offshore call center in Asia in 2024 and anticipate adding additional offshore collectors in 2025. Looking ahead, we expect overall strong U.S. portfolio supply in 2025, driven by rising credit card balances and elevated charge-off rates.
Europe
Portfolio purchases were $508.3 million in Europe in 2024, an increase of 14.4% compared to 2023, with stronger market supply in the fourth quarter of 2024 and broad geographic diversity of our portfolio purchases. During 2024, our deep seller relationships helped us expand on our track record of disciplined growth and profitability in the region, and for 2025, we are expecting portfolio supply to remain relatively stable.
Brazil
Through our strategic partnerships, we have been able to consistently generate cash collections growth and profitability in Brazil. On January 2, 2025, we exercised our right to sell our remaining 11.7% interest in RCB Investimentos S.A. ("RCB"), a servicing company for nonperforming loans in Brazil, and expect to record an estimated net after-tax gain of approximately $25.0 million prior to June 30, 2025 (refer to Note 17 to our Consolidated Financial Statements included in Item 8 of this Form 10-K for additional information). This transaction will not impact our majority ownership interests in our Brazilian investment funds, and we do not expect it will impact our existing operations or future portfolio investment opportunities in Brazil.
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Summary of Selected Financial Data
Income statement
Performance data and ratios
Return on average Total stockholders' equity - PRA Group (3) 6.1 (7.2) 9.5
Return on average tangible equity (4) 9.5 (11.3) 15.0
Common share data
Diluted earnings per share $ 1.79 $ (2.13) $ 2.94
Portfolio volumes
Balance sheet (year-end)
Credit facility availability (year-end)
Headcount (year-end)
(1)Adjusted earnings before interest, taxes, depreciation and amortization ("Adjusted EBITDA") is a non-GAAP financial measure. Refer to section "Non-GAAP Financial Measures" for a reconciliation of Net income/(loss) attributable to PRA Group, the most directly comparable financial measure calculated and reported in accordance with GAAP, to Adjusted EBITDA.
(2)Calculated by dividing cash receipts less operating expenses by cash receipts.
(3)Calculated by dividing Net income income/(loss) attributable to PRA Group by average Total stockholders' equity - PRA Group for the year.
(4)Return on average tangible equity ("ROATE") is a non-GAAP financial measure. Average tangible equity is also a non-GAAP financial measure. Refer to section "Non-GAAP Financial Measures" for a reconciliation of Total stockholders' equity - PRA Group, the most directly comparable financial measure calculated and reported in accordance with GAAP, to average tangible equity.
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2024 vs. 2023
Portfolio purchases
Portfolio purchases for 2024 and 2023 were as follows (amounts in thousands):
Total portfolio purchases were $1.4 billion in 2024, an increase of $253.8 million, or 22.0%, compared to $1.2 billion in 2023. The increase was primarily due to an increase in Americas and Australia Core purchases of $212.2 million, driven by increases in market supply. Additionally, Europe Core purchases, which were spread broadly across our markets, increased $65.7 million due to higher volumes in certain markets and the addition of new sellers.
Cash collections
Cash collections for 2024 and 2023 were as follows (amounts in thousands):
Total cash collections were $1.9 billion in 2024, an increase of $208.1 million, or 12.5%, compared to $1.7 billion in 2023. The increase was primarily due to an increase in U.S. Core cash collections of $153.5 million, driven by higher recent purchasing levels and our cash-generating initiatives, particularly in the legal collections channel, which increased by $112.0 million. Cash collections in Europe increased $57.4 million, where higher recent purchasing levels helped drive increased collections in most of our markets.
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Portfolio revenue
Total portfolio revenue for 2024 and 2023 was as follows (amounts in thousands):
Total portfolio revenue was $1.1 billion in 2024, an increase of $311.8 million, or 39.7%, compared to $786.3 million in 2023. Portfolio income increased $100.1 million, or 13.2%, due in large part to the impact of higher purchasing and improved pricing in the U.S. beginning in 2023, while changes in expected recoveries increased $211.7 million. Recoveries collected in excess of forecast increased $91.0 million, or 139.7%, due in large part to overperformance on our pre-2021 U.S. Core pools, which benefited from our cash-generating initiatives. Changes in expected future recoveries increased $120.7 million, or 335.4%, from a net negative adjustment of $36.0 million in 2023 to a net positive adjustment of $84.7 million in 2024. The increase in 2024 was largely driven by increases to the collections forecasts on our pre-2021 U.S. Core pools and certain pools in Europe. In 2023, the net negative adjustment was largely due to the impact of a softer than expected tax refund season in the U.S., with nearly half of the negative adjustment related to our 2021 U.S. Core pool.
Operating expenses
Operating expenses for 2024 and 2023 were as follows (amounts in thousands):
Compensation and benefits
Compensation and benefits expense increased $10.1 million, or 3.5%, due largely to higher wage costs and compensation accruals in the current year, offset by a decrease of $7.3 million in severance related expenses. The costs associated with an increase in headcount to service our recent purchasing volumes were partially offset by leveraging third parties and offshore call centers to reduce collection costs.
Legal collection costs
Legal collection costs consist primarily of costs paid to courts where a lawsuit is filed for the purpose of attempting to collect on an account. The increase of $35.7 million, or 40.0%, was primarily due to higher account volumes in both our U.S. and Europe legal collections channels.
Legal collection fees
Legal collection fees represent contingent fees incurred for cash collections generated by our third-party attorney network. The increase of $18.6 million, or 48.7%, mainly reflected higher external legal collections within our U.S. Core portfolio.
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Agency fees
Agency fees primarily represent third-party collection fees. The increase of $8.6 million, or 11.6%, was primarily due to higher collection fees in Brazil.
Communication
Communication expense relates mainly to correspondence, network and calling costs associated with our collection efforts. The increase of $3.0 million, or 7.4%, was primarily due to an expansion in account volumes associated with higher levels of portfolio purchases.
Depreciation, amortization and impairment
Depreciation, amortization and impairment decreased $7.8 million, or 42.0%, due mainly to a $5.2 million impairment charge taken in 2023 associated with our decision to cease call center operations at one of our owned regional offices in the U.S.
Interest expense, net
Interest expense, net for 2024 and 2023 was as follows (amounts in thousands):
Interest expense, net was $229.3 million in 2024, an increase of $47.6 million, or 26.2%, compared to $181.7 million in 2023. The increase was primarily due to a higher average debt balance in 2024 to support increased levels of portfolio investments, and to a lesser extent, higher interest rates.
Income tax expense/(benefit)
Income tax expense/(benefit) and our effective tax rate for 2024 and 2023 were as follows (amounts in thousands):
Effective tax rate 19.2 % 19.5 %
Income tax expense was $21.0 million in 2024, an increase of $37.1 million, or 230.4%, compared to an income tax benefit of $16.1 million in 2023. The increase was primarily due to higher income before taxes in 2024. The effective tax rate decreased marginally and was impacted by changes in the mix of income from different taxing jurisdictions and the timing and amount of discrete items.
Noncontrolling interests
In Brazil, we purchase nonperforming loan portfolios through investment funds in which we hold a majority interest. The portion of our Net income/(loss) attributable to noncontrolling interests is reflected in Adjustment for net income attributable to noncontrolling interests in our Consolidated Income Statements, which totaled $18.0 million in 2024 compared to $16.7 million in 2023.
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Balance sheet
Finance receivables, net
Finance receivables, net were $4.1 billion as of December 31, 2024, an increase of $484.1 million, or 13.2%, compared to $3.7 billion as of December 31, 2023, driven largely by portfolio purchases of $1.4 billion and changes in expected recoveries of $240.9 million, partially offset by recoveries collected and applied to Finance receivables, net of $1.0 billion.
Goodwill
Goodwill was $396.4 million as of December 31, 2024, a decrease of $35.2 million, or 8.2%, compared to $431.6 million as of December 31, 2023. The decrease was due to foreign currency translation adjustments.
Borrowings
Borrowings were $3.3 billion as of December 31, 2024, an increase of $412.4 million, or 14.1%, compared to $2.9 billion as of December 31, 2023. The increase was primarily due to net borrowings under senior notes of $252.0 million and incremental net borrowings under our North American revolving credit facility of $127.7 million associated with the increase in purchasing levels during the year.
On May 20, 2024, we issued $400.0 million in aggregate principal amount of 8.875% Senior Notes due January 31, 2030 (the "2030 Notes"). On September 3, 2024, using funds obtained primarily from our North American revolving credit facility, we repaid our 7.375% Senior Notes due 2025 (the "2025 Notes") in full. On November 25, 2024, we issued an additional $150.0 million in aggregate principal amount of the 2030 Notes at a price of 103.625%.
Interest-bearing deposits
Interest-bearing deposits were $163.4 million as of December 31, 2024, an increase of $47.8 million, or 41.4%, compared to $115.6 million as of December 31, 2023. The increase was primarily driven by increased deposits from customers.
2023 vs. 2022
Refer to Item 7 "Management’s Discussion and Analysis of Financial Condition and Results of Operations" of our 2023 Form 10-K for a discussion of our 2023 results compared to our 2022 results.
Non-GAAP Financial Measures
We report our financial results in accordance with U.S. generally accepted accounting principles ("GAAP"). However, our management also uses certain non-GAAP financial measures, including:
•Adjusted EBITDA, to evaluate our performance and to set performance goals; and
•ROATE, as a measure to monitor and evaluate operating performance relative to our equity.
Adjusted EBITDA
We present Adjusted EBITDA because we consider it an important supplemental measure of our operational and financial performance. Our management believes Adjusted EBITDA helps provide enhanced period-to-period comparability of our operational and financial performance, as it excludes certain items whose fluctuations from period-to-period do not necessarily correspond to changes in the operations of our business, and is useful to investors as other companies in the industry report similar financial measures. Adjusted EBITDA should not be considered as an alternative to net income determined in accordance with GAAP. In addition, our calculation of Adjusted EBITDA may not be comparable to the calculation of similarly titled measures presented by other companies. Adjusted EBITDA is calculated starting with our GAAP financial measure, Net income/(loss) attributable to PRA Group, Inc. and is adjusted for:
•income tax expense (or less income tax benefit);
•foreign exchange loss (or less foreign exchange gain);
•interest expense, net (or less interest income, net);
•other expense (or less other income);
•depreciation and amortization;
•impairment of real estate;
•net income attributable to noncontrolling interests; and
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•recoveries collected and applied to Finance receivables, net less changes in expected recoveries.
The following table provides a reconciliation of Net income/(loss) attributable to PRA Group, Inc. as reported in accordance with GAAP to Adjusted EBITDA for the years indicated (amounts in thousands):
Adjusted EBITDA
Adjustments:
Foreign exchange (gain)/loss 9 (289) (985)
Impairment of real estate — 5,239 —
Net income attributable to noncontrolling interests 17,972 16,723 851
(1)Other expense reflects non-operating activities.
Return on average tangible equity
We use ROATE, which is a supplemental measure of performance that is not required by, or presented in accordance with, GAAP, to monitor and evaluate operating performance relative to our equity. Management believes ROATE is a useful financial measure for investors in evaluating the effective use of equity, and is an important component of our long-term shareholder return. Average tangible equity is defined as average Total stockholders' equity - PRA Group, Inc. less average goodwill and average other intangible assets. ROATE is calculated by dividing Net income/(loss) attributable to PRA Group, Inc. by average tangible equity.
The following table displays our ROATE and provides a reconciliation of Total stockholders' equity - PRA Group, Inc. as reported in accordance with GAAP to average tangible equity for the years indicated (amounts in thousands, except for ratio data):
Balance as of Year End Average Balance
Return on average tangible equity 9.5 % (11.3) % 15.0 %
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Supplemental Performance Data
The tables in this section provide supplemental performance data about our:
•ERC by geography, portfolio type and expected year of collection;
•Core cash collections separated between call center and other collections and legal collections, and constant currency adjusted cash collections;
•nonperforming loan portfolios and collections by geography, portfolio type and year of purchase; and
•U.S. portfolio purchases by major asset type and delinquency category.
The collections data presented reflects gross cash collections and does not reflect any costs to collect; therefore, it may not present relative profitability. The past performance of pools within certain geographies and portfolio types may not be comparable with other locations and portfolio types or indicative of future results.
Purchasing
We purchase portfolios of nonperforming loans from a variety of creditors, or acquire portfolios through strategic acquisitions, and segregate them into our Core or Insolvency portfolios, based on the status of the account upon acquisition. In addition, the accounts are segregated into geographical regions based upon where the account was acquired and, as applicable, foreign currency exchange rates are fixed for purposes of comparability in future periods. Ultimately, accounts are aggregated into annual pools based on portfolio type, geography and year of acquisition. Portfolios of accounts that were in an insolvency status at the time of acquisition are represented under Insolvency headings in the tables below. All other acquisitions of portfolios of accounts are included under Core headings. Once an account is initially segregated, it is not later transferred from an Insolvency pool to a Core pool, or vice versa.
Purchase price multiple
The purchase price multiple represents our estimate of total cash collections over the original purchase price of the portfolio. Purchase price multiples can vary over time due to a variety of factors, including pricing competition, supply levels, age of the accounts acquired, type and mix of portfolios purchased, expected costs to collect and returns, and changes in operational efficiency and effectiveness. When we pay more for a portfolio, the purchase price multiple and effective interest rate are generally lower. Certain types of accounts, such as Insolvency accounts, have lower collection costs, and we generally pay more for those types of accounts, which results in lower purchase price multiples but similar net income margins compared to other portfolio purchases.
ERC and TEC
Depending on the level of performance and expected future impacts from our operations, we may update ERC and TEC levels based on the results of our cash forecasting with a correlating adjustment to the purchase price multiple. We follow an established process to evaluate ERC, and we typically do not adjust our ERC and TEC until we gain sufficient collection experience with a pool of accounts. Over time, our TEC has often increased as pools have aged resulting in the ratio of TEC to purchase price for any given year of buying to gradually increase.
For additional information about our nonperforming loan portfolios, refer to Note 1 and Note 2 to our Consolidated Financial Statements included in Item 8 of this Form 10-K.
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Estimated remaining collections
The following table displays our ERC by geography, year and portfolio for the 12 months ending December 31, 2024 (amounts in thousands):
ERC By Geography, Year and Portfolio
(1)Reflects ERC of $3.3 billion for the U.S. and $484.7 million for other Americas and Australia.
(2)Reflects ERC of $1.6 billion for the UK, $931.1 million for Central Europe, $826.0 million for Northern Europe and $285.3 million for Southern Europe.
Cash collections
The following table displays our cash collections by geography and portfolio, Core cash collections separated between call center and other collections and legal collections, and constant currency adjusted cash collections, for the years indicated (amounts in thousands):
Cash Collections by Geography and Portfolio
Americas and Australia
Europe
Total
(1)Total cash collections adjusted refers to prior year foreign currency cash collections remeasured at average U.S. dollar exchange rates for the current year.
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Portfolio purchases by major asset type and delinquency category (U.S. only)
The following tables categorize our U.S. portfolio purchases by major asset type and delinquency category for the years indicated (amounts in thousands):
U.S. Portfolio Purchases by Major Asset Type
U.S. Portfolio Purchases by Delinquency Category
(1)Fresh accounts are typically past due 120 to 270 days, charged-off by the credit originator and sold prior to any post-charge-off collection activity.
(2)Primary accounts are typically 240 to 450 days past due, charged-off and have been previously placed with one contingent fee servicer.
(3)Secondary accounts are typically 360 to 630 days past due, charged-off and have been previously placed with two contingent fee servicers.
(4)Other accounts are 480 days or more past due, charged-off and have previously been worked by three or more contingent fee servicers.
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Purchase Price Multiplesas of December 31, 2024Amounts in thousands
Americas and Australia Core
Americas Insolvency
Europe Core
Europe Insolvency
(1)Includes the acquisition date finance receivables portfolios that were acquired through our business acquisitions.
(2)Non-U.S. amounts are presented at the exchange rate at the end of the year in which the portfolio was purchased. In addition, any purchase price adjustments that occur throughout the life of the portfolio are presented at the year-end exchange rate for the respective year of purchase.
(3)Non-U.S. amounts are presented at the year-end exchange rate for the respective year of purchase.
(4)Non-U.S. amounts are presented at the December 31, 2024 exchange rate.
(5)The original purchase price multiple represents the purchase price multiple at the end of the year of acquisition.
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Portfolio Financial Information (1)
Amounts in thousands
Americas and Australia Core
Americas Insolvency
Europe Core
Europe Insolvency
(1)Includes the nonperforming loan portfolios that were acquired through our business acquisitions.
(2)Non-U.S. amounts are presented using the average exchange rates during the current year.
(3)Non-U.S. amounts are presented at the December 31, 2024 exchange rate.
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Cash Collections
Americas and Australia Core
Americas Insolvency
Europe Core
Europe Insolvency
(1)Non-U.S. amounts are presented using the average exchange rates during the respective year.
(2)Includes the acquisition date finance receivables portfolios acquired through our business acquisitions.
(3)Non-U.S. amounts are presented at the exchange rate at the end of the year in which the portfolio was purchased. In addition, any purchase price adjustments that occur throughout the life of the pool are presented at the year-end exchange rate for the respective year of purchase.
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Liquidity and Capital Resources
We actively manage our liquidity to meet our business needs and financial obligations.
Sources of liquidity
Cash and cash equivalents
As of December 31, 2024, cash and cash equivalents totaled $105.9 million, of which $91.1 million consisted of cash related to international operations with indefinitely reinvested earnings. For additional information about the unremitted earnings of our international subsidiaries, refer to Note 13 to our Consolidated Financial Statements included in Item 8 of this Form 10-K.
Borrowings
As of December 31, 2024, we had the following committed amounts, borrowings and availability under our financing arrangements (amounts in thousands):
Availability
Debt premium and issuance costs, net — (10,920) — — —
(1)Available borrowings after calculation of borrowing base, subject to the committed amounts and debt covenants, which may be used for general corporate purposes, including portfolio purchases.
(2)Subject to borrowing base and debt covenants, including advance rates ranging from 35-55% of applicable ERC.
Interest-bearing deposits
As of December 31, 2024, interest-bearing deposits totaled $163.4 million. Under our European revolving credit facility, our interest-bearing deposit funding is limited to SEK 2.2 billion (the equivalent of $199.0 million U.S. dollars as of December 31, 2024).
Uses of liquidity and material cash requirements
We believe that funds generated from our business activities, together with existing cash, available borrowings under our revolving credit facilities and access to the capital markets, will be sufficient to finance our operations, planned capital expenditures, forward flow purchase commitments, debt maturities and additional portfolio purchases for at least the next 12 months.
Our long-term capital requirements will depend in large part on the level of nonperforming loan portfolios that we purchase. We have the ability to slow the purchase of nonperforming loans without significantly impacting current year collections. For example, in 2024, we purchased $1.4 billion in nonperforming loan portfolios, which generated $213.6 million of cash collections, representing 11.4% of our total cash collections.
Market conditions permitting, as we deem appropriate, we may seek to access the debt or equity capital markets or other sources of funding, and it may be necessary to raise additional funds to achieve our business objectives. Business acquisitions or higher than expected levels of portfolio purchasing could require additional financing. We may also from time-to-time repurchase senior notes in the open market or otherwise.
Forward flows
We enter into forward flow agreements for the purchase of nonperforming loans. These agreements typically have terms ranging from six to 12 months, or they can be open-ended, and establish purchase prices and specific criteria for the accounts to be purchased. Some of the agreements establish a volume reference for the contract term in the form of a target or maximum,
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however, very few agreements establish a minimum contractual obligation, and many of the contracts contain early termination provisions allowing either party to cancel the agreements in accordance with a specified notice period.
As of December 31, 2024, we had forward flow agreements in place with an estimated purchase price of approximately $498.9 million over the next 12 months. This total can vary significantly based on the remaining terms and renewal dates of the agreements and is comprised of $403.1 million for the Americas and Australia and $95.8 million for Europe. These amounts represent our estimated forward flow purchases over the next 12 months under the agreements in place based on projections and other factors, including sellers' estimates of future forward flow sales, and are dependent on actual delivery by the sellers and, in some cases, the impact of foreign exchange rate fluctuations. Accordingly, amounts purchased under these agreements may vary significantly. In addition to these agreements, we may also enter into new or renewed forward flow commitments and/or close on spot purchase transactions.
Borrowings
As of December 31, 2024, we had$3.3 billion in outstanding borrowings. The estimated interest, unused fees and principal payments for the next 12 months are$236.0 million, of which $10.0 million relates to principal on our term loan. After 12 months, principal payments on our debt are due from between one and five years. Many of our financing arrangements include covenants with which we must comply, and as of December 31, 2024, we were in compliance with these covenants.
On May 20, 2024, we issued $400.0 million in aggregate principal amount of our 2030 Notes. On September 3, 2024, using funds obtained primarily from our North American revolving credit facility, we repaid our 2025 Notes in full. On November 25, 2024, we issued an additional $150.0 million in aggregate principal amount of our 2030 Notes at a price of 103.625%.
For additional information about our credit facilities, term loan and senior notes, refer to Note 7 to our Consolidated Financial Statements included in Item 8 of this Form 10-K.
Share repurchases
On February 25, 2022, our Board of Directors approved a share repurchase program under which we are authorized to repurchase up to $150.0 million of our outstanding common stock. The share repurchase program has no stated expiration date and does not obligate us to repurchase any specified amount of shares, remains subject to the discretion of our Board of Directors and, subject to compliance with applicable laws, may be modified, suspended or discontinued at any time.
Repurchases may be made from time-to-time in open market transactions, through privately negotiated transactions, in block transactions, through purchases made in accordance with trading plans adopted under Rule 10b5-1 of the Exchange Act, or other methods, subject to market and/or other conditions and applicable regulatory requirements. Repurchases are also subject to restrictive covenants contained in our credit facilities and the indentures that govern our senior notes. There were no repurchases during 2024, and as of December 31, 2024, we had $67.7 million remaining for share repurchases under the program.
Leases
Our leases have remaining terms from one to 11 years. As of December 31, 2024, we had $36.4 million in lease liabilities, of which $9.2 million is due within the next 12 months. For additional information, refer to Note 5 to our Consolidated Financial Statements included in Item 8 of this Form 10-K.
Derivatives
We enter into derivative financial instruments to reduce our exposure to fluctuations in interest rates on variable rate debt and foreign currency exchange rates. As of December 31, 2024, we had $5.0 million of derivative liabilities, of which $0.2 million matures within the next 12 months. The remaining $4.8 million matures in 2028. For additional information, refer to Note 8 to our Consolidated Financial Statements included in Item 8 of this Form 10-K.
Investments
As of December 31, 2024, we held $55.8 million in Swedish treasury securities to meet the liquidity requirements of the Swedish Financial Services Authority for our banking subsidiary, AK Nordic AB.
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Cash flow analysis
The following table summarizes our cash flow activity for the years ended December 31, 2024 and 2023 (amounts in thousands):
Net cash provided by/(used in):
Operating activities
Net cash used in operating activities mainly reflects the portion of our cash collections recognized as revenue and cash paid for operating expenses, interest and income taxes. It does not include cash collections applied to the negative allowance, which are classified as cash flows provided by investing activities. To calculate net cash used in operating activities, net income/(loss) was adjusted for (i) non-cash items included in net income/(loss), such as unrealized foreign currency transaction gains/(losses), changes in expected recoveries, depreciation, amortization and impairment, deferred income taxes, fair value changes in equity securities, and share-based compensation, as well as (ii) changes in the balances of operating assets and liabilities, which can vary significantly in the normal course of business due to the amount and timing of payments.
Net cash used in operating activities was $94.6 million in 2024 compared to $97.5 million in 2023. The change was primarily due to higher cash collections recognized as income, which was offset by higher cash paid for interest.
Investing activities
Net cash used in investing activities increased $147.6 million in 2024, primarily driven by an increase of $246.8 million in purchases of nonperforming loan portfolios, offset by an increase of $110.9 million in recoveries collected and applied to Finance receivables, net.
Financing activities
Net cash provided by financing activities increased $135.5 million in 2024, primarily driven by $202.4 million in net proceeds from issuances and repayments of senior notes, and in 2023, the retirement of our convertible senior notes, a $61.3 million increase in interest-bearing deposits and a $35.1 million increase in net proceeds obtained under our term loan, offset by a decrease of $153.7 million in net proceeds from our lines of credit.
During 2024, we issued and repaid senior notes (refer to "Borrowings" above for details). On October 28, 2024, we amended our North American revolving credit facility and term loan to, among other things, extend the maturity date from July 30, 2026 to October 28, 2029, increase the aggregate revolving and term loan commitments by $40.1 million to $1.548 billion, reduce the U.S. domestic revolving credit facility from $1.0 billion to $950.0 million, increase the Canadian revolving credit facility from $75.0 million to $125.0 million, increase the term loan from $432.5 million to $472.6 million and modify certain financial covenants. On October 30, 2024, we amended our UK revolving credit facility to, among other things, extend the maturity date from July 30, 2026 to October 30, 2029, decrease the revolving credit facility from $800.0 million to $725.0 million and modify certain financial covenants to more closely conform to our North American revolving credit facility. On October 28, 2024, we amended our European revolving credit facility to modify certain financial covenants to more closely conform to our North American and UK revolving credit facilities.
On June 1, 2023, we used substantially all of the net proceeds from the issuance of our Senior Notes due 2028 to retire our 3.50% Convertible Senior Notes due 2023 at their maturity.
For additional information about our credit facilities, term loan and senior notes, refer to Note 7 to our Consolidated Financial Statements included in Item 8 of this Form 10-K.
Effect of exchange rates on cash
The net effect of exchange rates on cash decreased by $26.1 million in 2024, primarily due to the impact of the valuation of the U.S. dollar on foreign currency denominated borrowings and intercompany balances.
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Recent Accounting Pronouncements
For discussion of recent accounting pronouncements and the anticipated effects on our Consolidated Financial Statements, refer to Note 1 to our Consolidated Financial Statements included in Item 8 of this Form 10-K.
Critical Accounting Estimates
Our Consolidated Financial Statements have been prepared in accordance with GAAP. Some of our significant accounting policies require that we use estimates, assumptions and judgments that affect the reported amounts of revenues, expenses, assets and liabilities. For discussion of our significant accounting policies, refer to Note 1 to our Consolidated Financial Statements included in Item 8 of this Form 10-K.
We consider accounting estimates to be critical if they (1) involve a significant level of estimation uncertainty and (2) have had, or are reasonably likely to have, a material impact on our financial condition or results of operations.We base our estimates on historical experience, current trends and various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. If these estimates differ significantly from actual results, the impact on our Consolidated Financial Statements may be material. We have determined that the following accounting policies involve critical estimates:
Revenue recognition - finance receivables
Revenue recognition for finance receivables involves the use of estimates and the exercise of judgment on the part of management. These estimates include projections of the amount and timing of cash collections we expect to receive from our pools of accounts. We review individual pools for trends, actual performance versus projections and curve shape (a graphical depiction of the amount and timing of cash collections). We then project ERC and apply a discounted cash flow methodology to our ERC. Adjustments to ERC may include adjustments reflecting recent collection trends, our view of current and future economic conditions, changes in collection assumptions or other timing related adjustments.
Significant changes in our cash flow estimates could result in increased or decreased revenue as we immediately recognize the discounted value of such changes using the constant effective interest rate of the pool. Generally, adjustments to cash forecasts result in an adjustment to revenue at an amount less than the impact of the performance in the period due to the effects of discounting. Additionally, cash collection forecast increases result in more revenue being recognized, and cash collection forecast decreases in less revenue being recognized, over the life of the pool.
Goodwill
In accordance with Financial Accounting Standards Board ("FASB") ASC Topic 350, "Intangibles-Goodwill and Other" ("ASC 350"), we evaluate goodwill for impairment annually as of October 1, and more frequently if circumstances indicate that it is more-likely-than-not that the fair value of a reporting unit is below its carrying value.
We determine the fair value of a reporting unit by applying the income approach and market approach, which are prescribed under ASC Topic 820 "Fair Value Measurements and Disclosures". Under the income approach, we estimate the fair value of a reporting unit based on the present value of estimated future cash flows and a residual terminal value. Cash flow projections are based on management's estimates of a variety of factors, including growth rates and operating margins, which take into consideration industry and market conditions. Under the market approach, we estimate fair value based on market trading multiples and other relevant market transactions involving comparable publicly traded companies with operating and investment characteristics similar to the reporting unit. Depending on the availability of public data and suitable comparable transaction data, we may give more weight to the income approach than the market approach. We also assess the reasonableness of the aggregate estimated fair value of our reporting units by comparison to our market capitalization over a reasonable period, considering historic control premiums in the financial services industry and the current market environment.
As of December 31, 2024, we had goodwill of $396.4 million, consisting primarily of $369.5 million in our Debt Buying and Collection ("DBC") reporting unit. We performed our most recent annual impairment review as of October 1, 2024, using a quantitative assessment, and concluded that goodwill was not impaired. Under the prior year impairment test, the excess of our DBC reporting unit’s fair value over its carrying value was approximately 6.0%, and although the excess increased to approximately 11.0% under our most recent test, if our cash flow projections are not met or if market factors utilized in the impairment test were to deteriorate, including adverse changes in the debt sales market that impact our estimated purchasing volumes and purchase price multiples, an increase in the discount rate, or a sustained decline in our stock price, the reporting unit may be at-risk for future impairment.
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We estimate the fair value of the DBC reporting unit based on the income approach, and as an assessment for reasonableness, also apply the market approach. Key inputs to the DBC reporting unit’s fair value under the income approach included our forecasted financial results and the discount rate. Forecasted financial results were developed considering several inputs and assumptions, including portfolio purchasing volume, purchase price multiples, ERC growth rate, terminal value multiple, operating expenses and the projected impact of certain strategic and operational initiatives. Purchase price multiples related to our existing portfolios were based on historical growth rates, while purchase price multiples on future portfolio purchases were based on recent and expected future purchasing metrics.
We have implemented a number of strategic and operational initiatives in our U.S. business designed to increase cash collections while reducing our marginal costs and continue to implement additional initiatives. The estimated net cash flows from certain of these initiatives were incorporated in our goodwill evaluation, reflecting an assessment of our ability to execute such initiatives. The discount rate of 8.3% utilized for the DBC reporting unit as of October 1, 2024 was based on the weighted-average cost of capital adjusted for the relevant risk associated with business-specific characteristics, including assumptions related to the reporting unit's ability to execute on the projected cash flows.
Our goodwill evaluation is dependent on a number of factors, both internal and external. The assumptions used in estimating the DBC reporting unit’s fair value were based on currently available data and involved the exercise of judgment. There are inherent uncertainties related to the assumptions used in our evaluation and to our application of those assumptions. If market factors deteriorate, or if estimates used in our quantitative assessment prove to be inaccurate, we may have to record impairment charges in future periods.
Income taxes
We are subject to income taxes in the U.S. and in numerous international jurisdictions. These tax laws are complex and subject to different interpretations by the taxpayer and the relevant government taxing authorities. When determining our domestic and non-U.S. income tax expense, we make judgments about the application of these inherently complex laws.
We record a tax provision for the anticipated tax consequences of the reported results of operations. The provision for income taxes is estimated using the asset and liability method, under which deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax basis of assets and liabilities, and for operating losses and tax credit carryforwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates that apply to taxable income in effect for the years in which those tax assets are expected to be realized or settled.
We exercise significant judgment in estimating the potential exposure to unresolved tax matters and apply a more likely than not standard for recording tax benefits related to uncertain tax positions in the application of complex tax laws. While actual results could vary, we believe we have adequate tax accruals with respect to the ultimate outcome of such unresolved tax matters. We record interest and penalties related to unresolved tax matters as a component of income tax expense when the more likely than not standards are not met.
If all or part of the deferred tax assets are determined not to be realizable in the future, we would establish a valuation allowance and charge the impact to earnings in the period such a determination is made. If we subsequently realize deferred tax assets that were previously determined to be unrealizable, the respective valuation allowance would be reversed, resulting in a positive adjustment to earnings. The establishment or release of a valuation allowance does not have an impact on cash, nor does such an allowance preclude the use of loss carryforwards or other deferred tax assets in future periods. The calculation of tax liabilities involves significant judgment in estimating the impact of uncertainties in the application of complex tax laws. Resolution of these uncertainties in a manner inconsistent with our expectations could have a material impact on our results of operations and financial position. For further information regarding our uncertain tax positions, refer to Note 13 to our Consolidated Financial Statements included in Item 8 of this Form 10-K.
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Frequently Used Terms
We may use the following terminology throughout this Form 10-K:
•"Buybacks" refers to purchase price refunded by the seller due to the return of ineligible nonperforming loan accounts.
•"Cash collections" refers to collections on our nonperforming loan portfolios.
•"Cash receipts" refers to cash collections on our nonperforming loan portfolios, fees and revenue recognized from our class action claims recovery services.
•"Changes in expected recoveries" refers to the differences of actual recoveries received when compared to expected recoveries and the net present value of changes in estimated remaining collections.
•"Core" accounts or portfolios refer to accounts or portfolios that are nonperforming loans and are not in an insolvent status upon acquisition. These accounts are aggregated separately from insolvency accounts.
•"Estimated remaining collections" or "ERC" refers to the sum of all future projected cash collections on our nonperforming loan portfolios.
•"Finance receivables" or "receivables" refers to the negative allowance for expected recoveries recorded on our balance sheet as an asset.
•"Insolvency" accounts or portfolios refer to accounts or portfolios of nonperforming loans that are in an insolvent status when we purchase them and, as such, are purchased as a pool of insolvent accounts. These accounts include IVAs, Trust Deeds in the UK, Consumer Proposals in Canada and bankruptcy accounts in the U.S., Canada, Germany and the UK.
•"Negative allowance" refers to the present value of cash flows expected to be collected on our finance receivables.
•"Portfolio acquisitions" refers to all nonperforming loan portfolios acquired as a result of a purchase or added as a result of a business acquisition.
•"Portfolio purchases" refers to all nonperforming loan portfolios purchased in the normal course of business and excludes those added as a result of business acquisitions.
•"Portfolio income" reflects revenue recorded due to the passage of time using the effective interest rate calculated based on the purchase price of nonperforming loan portfolios and estimated remaining collections.
•"Purchase price" refers to the cash paid to a seller to acquire nonperforming loans.
•"Purchase price multiple" refers to the total estimated collections on our nonperforming loan portfolios divided by purchase price.
•"Recoveries collected" refers to cash collections plus buybacks and other adjustments.
•"Total estimated collections" or "TEC" refers to actual cash collections plus estimated remaining collections on our nonperforming loan portfolios.
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Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Our business is subject to various financial risks, including market, currency, interest rate, credit, liquidity and cash flow risk. We use various strategies, including derivative financial instruments, to manage these risks; however, they can still impact our Consolidated Financial Statements.
We do not utilize derivative financial instruments with a level of complexity or with a risk greater than the exposure to be managed, nor do we enter into or hold derivatives for trading or speculative purposes. Derivative instruments involve, to varying degrees, elements of non-performance or credit risk. We do not believe that we currently face a significant risk of loss in the event of non-performance by the counterparties to these instruments, as these transactions were executed with a diversified group of major financial institutions with investment-grade credit ratings. Our intention is to spread our counterparty credit risk across a number of counterparties so that exposure to a single counterparty is mitigated.
Interest Rate Risk
We are subject to interest rate risk from borrowings on our variable rate credit facilities, as well as our interest-bearing deposits. As such, our consolidated financial results are subject to fluctuations due to changes in market interest rates. To reduce our exposure to changes in the market rate of interest, we have entered into interest rate derivative contracts to hedge a portion of our borrowings under floating rate financing arrangements. Under the terms of the interest rate derivatives, we receive a variable interest rate and pay a fixed interest rate. Of our $3.3 billion in total borrowings as of December 31, 2024, $1.3 billion was fixed rate debt. Considering these fixed rate borrowings and the interest rate hedges on our variable rate debt, with maturities ranging from five months to five years, as of December 31, 2024, 60% of our total debt was either fixed rate or converted to a fixed rate.
We assess interest rate risk by estimating the increase or decrease in interest expense that would occur due to a change in short-term interest rates. Borrowings on our variable rate credit facilities were $2.0 billion as of December 31, 2024, and based on our debt structure, assuming a 50 basis point decrease/increase in interest rates, interest expense over the following 12 months would decrease/increase by an estimated $7.0 million.
Currency Exchange Risk
We operate internationally and enter into transactions denominated in various foreign currencies. Our subsidiaries use multiple functional currencies, and weakness in one particular currency might be offset by strength in other currencies over time. In 2024, our revenues from operations outside the U.S. were $520.6 million.
Fluctuations in foreign currencies could cause us to incur foreign currency gains and losses, and could affect our comprehensive income and stockholders' equity. Additionally, our reported financial results could change from period-to-period due solely to fluctuations between currencies. Foreign currency gains and losses are primarily the result of the remeasurement of transactions in other currencies into an entity's functional currency. Foreign currency gains and losses are included as a component of Other income and (expense) in our Consolidated Income Statements. From time-to-time, we may elect to enter into foreign exchange derivative contracts to reduce these variations in our Consolidated Income Statements.
When an entity's functional currency is different than the reporting currency of its parent, foreign currency translation adjustments may occur. Foreign currency translation adjustments are included as a component of Other comprehensive income/(loss) in our Consolidated Statements of Comprehensive Income and as a component of Equity in our Consolidated Balance Sheets.
We have taken measures to mitigate the impact of foreign currency fluctuations. We have organized our European operations so that portfolio ownership and collections generally occur within the same entity. Additionally, our European and UK credit facilities are multi-currency facilities, allowing us to better match funding and portfolio acquisitions by currency. We actively monitor the value of our finance receivables by currency. In the event adjustments are required to our liability composition by currency, we may, from time-to-time, execute re-balancing foreign exchange contracts to more closely align funding and portfolio acquisitions by currency.
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Item 8. Financial Statements and Supplementary Data.
Index to Financial Statements
Reports of Independent Registered Public Accounting Firms 42
Consolidated Balance Sheets 45
Consolidated Income Statements 46
Consolidated Statements of Comprehensive Income 47
Consolidated Statements of Changes in Equity 48
Consolidated Statements of Cash Flows 49
Notes to Consolidated Financial Statements 50
1 – Summary of Significant Accounting Policies 50
2– Finance Receivables, net 56
3 – Investments 57
6 – Property and Equipment, net 59
7 – Borrowings 60
8 – Derivatives 64
9 – Fair Value 65
10 – Accumulated Other Comprehensive Loss 67
11 – Share-Based Compensation 67
12 – Earnings per Share 69
14 – Commitments and Contingencies 71
15 – Segments and Geographic Information 72
16 – Retirement Plans 73
17 – Subsequent Event 74
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Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of PRA Group, Inc.:
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of PRA Group, Inc. (the Company) as of December 31, 2024 and 2023, the related consolidated income statements, statements of comprehensive income, statements of changes in equity and statements of cash flows for each of the three years in the period ended December 31, 2024, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 27, 2025 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
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Estimate of expected future recoveries on purchased credit deteriorated assets
Goodwill Impairment Assessment
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/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2021.
Richmond, Virginia
February 27, 2025
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PRA Group, Inc.
Consolidated Balance Sheets
December 31, 2024 and 2023
(Amounts in thousands)
Assets
Liabilities and Equity
Liabilities:
Equity:
The accompanying notes are an integral part of these Consolidated Financial Statements.
45
PRA Group, Inc.
Consolidated Income Statements
For the years ended December 31, 2024, 2023 and 2022
(Amounts in thousands, except per share amounts)
Revenues:
Operating expenses:
Other income and (expense):
Foreign exchange gain/(loss), net (9) 289 985
Net income/(loss) per common share attributable to PRA Group, Inc.:
Weighted average number of shares outstanding:
The accompanying notes are an integral part of these Consolidated Financial Statements.
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PRA Group, Inc.
Consolidated Statements of Comprehensive Income
For the years ended December 31, 2024, 2023 and 2022
(Amounts in thousands)
Other comprehensive income/(loss), net of tax
Debt securities available-for-sale 140 302 (16)
The accompanying notes are an integral part of these Consolidated Financial Statements.
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PRA Group, Inc.
Consolidated Statements of Changes in Equity
For the years ended December 31, 2024, 2023 and 2022
(Amounts in thousands)
Shares Amount
Components of comprehensive income, net of tax:
Debt securities available-for-sale — — — — (16) — (16)
Distributions to noncontrolling interests — — — — — (6,691) (6,691)
Contributions from noncontrolling interests — — — — — 17,554 17,554
Vesting of restricted stock 303 4 (4) — — — —
Share-based compensation expense — — 13,047 — — — 13,047
Employee stock relinquished for payment of taxes — — (8,472) — — — (8,472)
Components of comprehensive income, net of tax:
Debt securities available-for-sale — — — — 302 — 302
Distributions to noncontrolling interests — — — — — (10,140) (10,140)
Vesting of restricted stock 267 2 (2) — — — —
Share-based compensation expense — — 11,095 — — — 11,095
Employee stock relinquished for payment of taxes — — (6,194) — — — (6,194)
Components of comprehensive income, net of tax:
Cash flow hedges — — — — (4,486) — (4,486)
Debt securities available-for-sale — — — — 140 — 140
Distributions to noncontrolling interests — — — — — (19,287) (19,287)
Contributions from noncontrolling interests — — — — — 2,396 2,396
Vesting of restricted stock 263 3 (3) — — — —
Share-based compensation expense — — 13,470 — — — 13,470
Employee stock relinquished for payment of taxes — — (2,656) — — — (2,656)
The accompanying notes are an integral part of these Consolidated Financial Statements.
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PRA Group, Inc.
Consolidated Statements of Cash Flows
For the years ended December 31, 2024, 2023 and 2022
(Amounts in thousands)
Cash flows from operating activities:
Amortization of debt discount or premium and issuance costs 10,567 9,223 10,097
Net unrealized foreign currency transaction (gain)/loss 5,200 (16,552) 34,970
Changes in operating assets and liabilities:
Accrued expenses, accounts payable and other liabilities 30,947 15,283 (8,808)
Net cash provided by/(used in) operating activities (94,594) (97,535) 21,592
Cash flows from investing activities:
Cash flows from financing activities:
Proceeds from long-term debt 472,611 — —
Retirement and repurchase of senior notes (298,000) (3,657) —
Retirement of convertible notes — (345,000) —
Repurchase of common stock — — (111,371)
Tax withholdings related to share-based payments (2,655) (6,194) (8,472)
Contributions from noncontrolling interests 2,396 — 17,554
Net increase/(decrease) in interest-bearing deposits 59,848 (1,416) 4,688
Supplemental disclosure of cash flow information:
Reconciliation to Balance Sheet accounts:
The accompanying notes are an integral part of these Consolidated Financial Statements.
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PRA Group, Inc.
Notes to Consolidated Financial Statements
1. Summary of Significant Accounting Policies:
Nature of operations
As used herein, the terms "PRA Group," the "Company," or similar terms refer to PRA Group, Inc. and its subsidiaries.
PRA Group, Inc., a Delaware corporation, is a global financial services company with operations in the Americas, Europe and Australia. The Company's primary business is the purchase, collection and management of portfolios of nonperforming loans. The Company also purchases and provides fee-based services for class action claims recoveries in the United States ("U.S.").
Basis of presentation
The Consolidated Financial Statements of the Company are prepared in accordance with U.S. generally accepted accounting principles ("GAAP"). The preparation of the Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect reported amounts and disclosures. Realized results could differ from those estimates and assumptions.
Reclassification of prior year presentation
In the Consolidated Balance Sheets, Consolidated Income Statements and Consolidated Statements of Cash Flows, certain prior year amounts have been reclassified for consistency with the current year presentation.
Consolidation
The Consolidated Financial Statements include the accounts of PRA Group and other entities in which the Company has a controlling interest. All significant intercompany accounts and transactions have been eliminated.
Entities in which the Company has a controlling financial interest, through ownership of the majority of the entities’ voting equity interests, or through other contractual rights that give the Company control, consist of entities that purchase and collect on portfolios of nonperforming loans. Noncontrolling interests represent the portion of net income and equity attributable to third-party owners of consolidated subsidiaries that are not wholly-owned by the Company. These noncontrolling interests relate primarily to funds in Brazil that invest in nonperforming loan portfolios.
Investments in companies in which the Company has significant influence over operating and financing decisions, but does not own a majority of the voting equity interests, are accounted for in accordance with the equity method of accounting, which requires the Company to recognize its proportionate share of the entity’s net earnings. The Company's equity method investment is included in Investments, with income or loss included in Other revenue.
The Company performs on-going reassessments whether changes in the facts and circumstances regarding the Company’s involvement with an entity could cause the Company’s consolidation conclusions to change.
Foreign currency
Assets and liabilities have been translated into the reporting currency using the exchange rates in effect on the date of the Consolidated Balance Sheets. Equity accounts are translated at historical rates, except for the change in retained earnings during the year, which is the result of the income statement translation process. Revenue and expense accounts are translated using the weighted average exchange rate during the period. The cumulative translation adjustments associated with the net assets of international subsidiaries are recorded in Accumulated other comprehensive loss in the accompanying Consolidated Statements of Changes in Equity.
Cash and cash equivalents
The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents.
Restricted cash
Cash that is subject to legal restrictions or is unavailable for general operating purposes is classified as restricted cash and included in Other assets in the Company's Consolidated Balance Sheets.
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PRA Group, Inc.
Notes to Consolidated Financial Statements
Accumulated other comprehensive loss
The Company records unrealized gains and losses on certain available-for-sale investments and foreign currency translation adjustments in other comprehensive income ("OCI"). Unrealized gains and losses on available for sale investments are reclassified to earnings as the gains or losses are realized upon sale of the securities. Translation gains or losses on foreign currency translation adjustments are reclassified to earnings upon the substantial sale or liquidation of investments in international operations. For the Company’s derivative financial instruments that are designated as hedging instruments, the change in fair value is recorded in OCI.
Investments
Debt securities
The Company determines the appropriate classification of its investments in debt securities at the time of purchase and reevaluates such determinations at each balance sheet date. Debt securities are classified as held-to-maturity when the Company has the positive intent and ability to hold the securities to maturity. Held-to-maturity securities are carried at amortized cost. Debt securities which the Company does not have the intent or ability to hold to maturity are classified as available-for-sale and carried at fair value. Fair value is determined using quoted market prices. Unrealized gains and losses are included in comprehensive income and reported in stockholders' equity. The Company evaluates debt securities for impairment. When there has been a decline in fair value below the amortized cost, the Company recognizes an impairment if: (1) it has the intent to sell the security; (2) it is more-likely-than-not that it will be required to sell the security before recovery of the amortized cost; or (3) it does not expect to recover the entire amortized cost of the security. If the Company identifies that the decline in fair value has resulted from credit losses, the credit loss component is recognized as an allowance in the Consolidated Balance Sheets with a corresponding charge to Other expense in the Consolidated Income Statements. The non-credit loss component remains in Other comprehensive loss until realized from a sale or subsequent impairment.
Equity securities
Investments in equity securities are measured at fair value with unrealized gains and losses reported in earnings.
Equity method investments
Equity investments that are not consolidated over which the Company exercises significant influence are accounted for as equity method investments. Whether or not the Company exercises significant influence with respect to an investee company depends on an evaluation of several factors including, among others, representation on the investee company’s board of directors and ownership level, which generally requires a 20% to 50% interest in the voting securities of the investee company. Under the equity method of accounting, an investee company’s accounts are not reflected in the Company’s Consolidated Balance Sheets and Income Statements; rather, the Company’s share of the earnings or losses of the investee company is reflected in Other revenue in the Consolidated Income Statements. The carrying value of the Company's equity method investee is reflected in Investments in the Company’s Consolidated Balance Sheets.
When the Company’s carrying value in an equity method investee company is reduced to zero, no further losses are recorded in the Company’s Consolidated Financial Statements unless the Company guaranteed obligations of the investee company or has committed additional funding. When the investee company subsequently reports income, the Company will not record its share of such income until it equals the amount of its share of losses not previously recognized.
Finance receivables and income recognition
Credit quality
The Company acquires portfolios of accounts that have experienced deterioration of credit quality between origination and the Company's acquisition of the accounts. The amount paid for a portfolio reflects the Company's determination that it is probable the Company will be unable to collect all amounts due according to the contractual terms of the underlying accounts. The Company accounts for the portfolios in accordance with the guidance for purchased credit deteriorated ("PCD") assets. The initial allowance for credit losses is added to the purchase price rather than recorded as a credit loss expense. The Company has established a policy to write off the amortized cost of individual assets when it is deemed probable that it will not collect on an individual asset.
Due to the deteriorated credit quality of the individual accounts, the Company may write off the unpaid principal balance of all accounts in a portfolio at the time of acquisition. However, when the Company has an expectation of collecting cash flows at the portfolio level, a negative allowance is established for expected recoveries at an amount not to exceed the amount
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PRA Group, Inc.
Notes to Consolidated Financial Statements
paid for the financial portfolios. The negative allowance is recorded as an asset measured at amortized cost and presented as Finance receivables, net in the Company's Consolidated Balance Sheets at the net present value of expected collections.
Portfolio segments
The Company’s nonperforming loan portfolio is comprised of its Core and Insolvency portfolio segments, with systematic methodologies used to determine the allowance for credit losses at the portfolio segment level. The Company’s Core portfolio contains loan accounts that are in default and that were purchased at a substantial discount to face value because either the credit originator and/or other third-party collection agencies have been unsuccessful in collecting the full balance owed. The Company’s Insolvency portfolio contains loan accounts that are in default and that were purchased at a substantial discount to face value in which the customer is involved in a bankruptcy or insolvency proceeding. Each of the two portfolio segments of purchased nonperforming loan portfolios consist of large numbers of homogeneous receivables with similar risk characteristics.
Effective interest rate and accounting pools
Within each portfolio, the Company pools accounts with similar risk characteristics that are acquired in the same year. Similar risk characteristics generally include the portfolio segment and geographic region. The initial effective interest rate of the pool is established based on the purchase price and expected recoveries of each individual purchase at the purchase date. During the year of acquisition, the annual pool is aggregated, and the blended effective interest rate will adjust to reflect new acquisitions and new cash flow estimates until the end of the year. The effective interest rate for a pool is fixed for the remaining life of the pool once the year has ended.
Methodology
The negative allowance is calculated by applying discounted cash flow methodologies to estimated remaining collections (“ERC”), and income is recognized over the estimated life of each pool at its constant effective interest rate. Subsequent changes (favorable and unfavorable) in expected cash flows are recognized within Changes in expected recoveries in the Consolidated Income Statements by recording the present value of those changes in ERC at the constant pool-specific effective interest rate. Amounts included in the estimate of recoveries do not exceed the aggregate amount of the amortized cost basis previously written off or expected to be written off.
The measurement of expected recoveries is based on relevant information about past events, current conditions and reasonable and supportable forecasts that affect the expected timing and amount of those recoveries. Development of the Company’s forecasts relies on both quantitative and qualitative factors. Qualitative factors can include both external and internal information and consider management’s view on available facts and circumstances at each reporting period. More specifically, external factors that may have an impact on the collectability, and subsequently on the overall profitability of acquired portfolios of nonperforming loans, would include new laws or regulations relating to collections, new interpretations of existing laws or regulations, and the overall condition of the economy. Internal factors that may have an impact on the collectability, and subsequently the overall profitability of acquired portfolios of nonperforming loans, would include necessary revisions to initial and post-acquisition operational scoring and modeling estimates, operational activities and the expected impact of operational strategies.
Portfolio income
The recognition of income on expected recoveries is based on the constant effective interest rate established for a pool.
Changes in expected recoveries
Changes in expected recoveries consist of differences between actual and expected recoveries for the reporting period, as well as the net present value of increases or decreases in ERC at the constant effective interest rates of the respective pools.
Buybacks and third-party fees
Agreements to acquire finance receivables include general representations and warranties from the sellers covering matters such as account holder death or insolvency and accounts settled or disputed prior to sale. The representation and warranty period permitting the return of these accounts from the Company to the seller is typically 90 to 180 days, with certain international agreements extending as long as 24 months. Any funds received from the seller as a return of purchase price are referred to as buybacks. Buyback funds are included in changes in expected recoveries when received. Fees paid to third parties other than the seller related to the direct acquisition of a portfolio of accounts are expensed when incurred.
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PRA Group, Inc.
Notes to Consolidated Financial Statements
Fee income recognition
The Company recognizes revenue from its class action claims recovery services when there is persuasive evidence that an arrangement exists, delivery has occurred or services have been rendered, the amount is fixed or determinable, and collectability is reasonably assured. This revenue is included within Other revenue in the Company's Consolidated Income Statements.
Property and equipment
Property and equipment, including improvements that significantly add to the productive capacity or extend useful life, are recorded at cost. Maintenance and repairs are expensed as incurred. Property and equipment are depreciated over their useful lives using the straight-line method, as follows:
Category Estimated Useful Life
Software and computer equipment Three to five years
Furniture and fixtures Ten years
Equipment Five years
Leasehold improvements Remaining term of the lease
Building improvements Ten to 39 years
When property is sold or retired, the cost and related accumulated depreciation are removed from the balance sheet and any gain or loss is included in the Company's Consolidated Income Statements. Impairment is assessed periodically when events or changes in circumstances indicate the carrying value of property and equipment may not be fully recoverable.
Goodwill
Goodwill is not amortized, but rather, is reviewed for impairment annually or more frequently if indicators of potential impairment exist. The Company performs its annual assessment of goodwill as of October 1. The Company may first assess qualitative factors to determine whether it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount, including goodwill. If management concludes that it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount, the fair value of the reporting unit is determined. An impairment loss is recorded for the amount by which the carrying value of the reporting unit exceeds its fair value, not to exceed the total amount of goodwill allocated to the respective reporting unit.
Income taxes
The provision for income taxes is estimated using the asset and liability method, under which deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax basis of assets and liabilities, and for operating losses and tax credit carryforwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates that apply to taxable income in effect for the years in which they are expected to be realized or settled. The Company has elected to treat U.S. taxes due in relation to Global Intangible Low-Taxed Income ("GILTI") as a current period expense when incurred.
The Company recognizes the financial statement benefit of an uncertain tax position if it is more-likely-than-not to be sustained based on the technical merits in the event of challenges by the relevant taxing authorities. The amount of benefit to recognize in the financial statements is the largest benefit that has a greater than 50% likelihood of being realized upon settlement. The Company exercises significant judgment in making these determinations. The Company records interest and penalties related to unrecognized tax benefits as a component of income tax expense when the more likely than not standards are not met. While actual results could vary, the Company believes it has made adequate tax accruals with respect to the ultimate outcome of such tax matters.
A valuation allowance for deferred tax assets is recorded and charged to earnings if it is determined that it is more-likely-than-not that the deferred tax asset will not be realized. The need for a valuation allowance is determined on a jurisdiction-by-jurisdiction basis.
Leases
The Company recognizes a liability for future lease payments and a right-of-use ("ROU") asset, representing its right to use the underlying asset for the lease term, in the Consolidated Balance Sheets.
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PRA Group, Inc.
Notes to Consolidated Financial Statements
The Company's operating lease portfolio primarily includes corporate offices and call centers. Its leases have remaining lease terms from one to11 years, some of which include options to extend the leases, the longest of which is for up to five years; while others include options to terminate the leases in accordance with specified notice periods. Exercises of lease renewal options are typically at the Company's sole discretion, with renewal periods included in ROU assets and lease liabilities based upon whether the Company is reasonably certain of exercising the renewal options and/or not exercising the termination options. The Company has lease agreements with lease and non-lease components, which are generally accounted for separately, and the Company elected not to apply the lease recognition requirements to short-term leases. The Company's lease agreements do not contain any material residual value guarantees or material restrictive covenants.
Since most of the Company's leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at the lease commencement date in determining the present value of the lease payments.
Share-based compensation
Compensation expense associated with share equity awards is recognized in the Consolidated Income Statements. The Company determines stock-based compensation expense for all share-based payment awards based on the measurement date fair value. The Company has certain share awards that include market conditions that affect the value upon vesting. The fair value of these shares is estimated using a lattice model. Compensation cost is not adjusted if the market condition is not met, as long as the requisite service is provided. The Company estimates a forfeiture rate for most equity share grants based on historical experience. Time-based equity share awards generally vest between one and three years from the grant date and are expensed on a straight-line basis over the vesting period. Equity share awards that contain a performance metric are expensed over the requisite service period, which is generally three years, in accordance with the performance level achieved in each reporting period. Refer to Note 11 for additional information.
Earnings per share
Basic earnings per share ("EPS") is computed by dividing net income available to common stockholders of PRA Group, Inc. by weighted average common shares outstanding. Diluted EPS is computed using the same components as basic EPS, with the denominator adjusted for the dilutive effect of the conversion spread of the Convertible Notes and nonvested share awards, if dilutive. Share-based awards that are contingent upon the attainment of performance goals are included in the computation of diluted EPS if the effect is dilutive. The dilutive effect of nonvested shares is computed using the treasury stock method, which assumes any proceeds that could be obtained upon the vesting of nonvested shares would be used to purchase common shares at the average market price for the period.
Derivatives
The Company periodically enters into derivative financial instruments, typically interest rate swaps and foreign currency contracts, to reduce its exposure to fluctuations in interest rates on variable rate debt and foreign currency exchange rates.
As part of its use of derivatives, the Company enters into netting agreements, including International Swap Dealers Association Agreements, which, in general, provide for the offsetting of amounts payable or receivable between it and the counterparty, at the election of both parties, for transactions that settle on the same date and in the same currency. The agreements also provide that in the event of an early termination, the counterparties have the right to offset amounts owed or owing under that and any other agreement with the same counterparty. The Company’s accounting policy is to not offset these positions and to report derivative asset and liability positions on a gross basis in the accompanying Consolidated Balance Sheets. The Company does not utilize derivative financial instruments with a level of complexity or with a risk greater than the exposure to be managed, nor does it enter into or hold derivatives for trading or speculative purposes.
All of the Company's outstanding derivative financial instruments are recognized in the Consolidated Balance Sheets at their fair values. The effect on earnings from recognizing the fair values of these derivative financial instruments depends on their intended use, hedge designation and effectiveness in offsetting changes in the fair values of the exposures they are hedging.
Under the cash flow hedge accounting model, changes in the fair values of instruments used to reduce or eliminate fluctuations in cash flows of anticipated or forecasted transactions are reported in equity as a component of Accumulated other comprehensive loss. Amounts in Accumulated other comprehensive loss are reclassified to earnings when the related hedged items affect earnings or the anticipated transactions are no longer probable, with those gains and losses recorded in the same financial statement line-item as the hedged item/forecasted transaction. Changes in the fair values of derivative financial instruments that are not designated as hedges or do not qualify for hedge accounting treatment are reported in earnings. Cash flows from the settlement of derivatives, including those designated in hedge accounting relationships and derivatives used for
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PRA Group, Inc.
Notes to Consolidated Financial Statements
economic hedges, are reflected in the Consolidated Statements of Cash Flows in the same categories as the cash flows of the hedged item.
For derivative financial instruments accounted for as hedging instruments, at inception, the Company formally designates and documents the derivative as hedging a specific underlying exposure, the risk management objective and the manner in which effectiveness of the hedge will be assessed. The Company assesses, both at inception and at each reporting period thereafter, whether the derivative financial instruments used in hedging transactions are effective in offsetting changes in fair value or cash flows of the hedged items. The Company discontinues the use of hedge accounting prospectively when (1) the derivative instrument is no longer effective in offsetting changes in fair value or cash flows of the hedged item; (2) the derivative instrument expires, is sold, terminated, or exercised; or (3) designating the derivative instrument as a hedge is no longer appropriate. Refer to Note 8 for additional information.
Use of estimates
The preparation of the Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the Consolidated Financial Statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates made by management include those related to the:
•timing and amount of future cash collections of the Company's finance receivables portfolios;
•determination of fair value of a reporting unit as part of testing goodwill for impairment; and
•interpretation of the tax laws required to calculate the Company's income tax-related balances, including evaluations of uncertain tax positions and the realizability of deferred tax assets.
Actual results could differ from these estimates making it reasonably possible that a change in these estimates could occur within one year.
Loss contingencies
The Company is subject to legal proceedings, lawsuits and other claims. The Company recognizes a liability for a loss contingency when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. The Company expenses the related legal costs as they are incurred. Refer to Note 14 for additional information.
Estimated fair value of financial instruments
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Disclosure of the estimated fair values of financial instruments often requires the use of estimates. The Company considers different levels of inputs in determining fair value. Refer to Note 9 for additional information.
Segment reporting
The Company has determined that it has a single operating and reportable segment, Accounts Receivable Management ("ARM"), which applies the same accounting policies as those described herein. The Company is managed on a consolidated basis by its CEO, who is also the Company's chief operating decision maker ("CODM").
Recently adopted accounting pronouncements
In November 2023, the Financial Accounting Standards Board ("FASB") issued ASU 2023-07, "Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures" ("ASU 2023-07"), which expands annual and interim disclosure requirements for reportable segments, primarily through enhanced disclosures about significant segment expenses. The Company adopted this ASU for the year ended December 31, 2024, and applied it retrospectively to all prior periods presented. Refer to Note 15 for additional information.
Recently issued accounting pronouncements not yet adopted
In December 2023, the FASB issued ASU 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures" ("ASU 2023-09"), which requires enhanced annual disclosures with respect to the rate reconciliation and income taxes paid information. This ASU is effective for fiscal years beginning after December 15, 2024, and may be adopted on a
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PRA Group, Inc.
Notes to Consolidated Financial Statements
prospective or retrospective basis, with early adoption permitted. The Company does not expect that adoption of this ASU will materially impact its consolidated financial statements.
In November 2024, the FASB issued ASU 2024-03, "Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses" ("ASU 2024-03"). Subsequently, the FASB issued ASU 2025-01 to clarify the effective date of ASU 2024-03. The standard provides guidance to expand disclosures related to the disaggregation of income statement expenses. The guidance is effective for fiscal years beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027, on a retrospective or prospective basis, with early adoption permitted. The Company does not expect that adoption of this ASU will materially impact its consolidated financial statements.
2. Finance Receivables, net:
Finance receivables, net consisted of the following as of December 31, 2024 and 2023 (amounts in thousands):
Amortized cost $ — $ —
Changes in Finance receivables, net by portfolio type for the years ended December 31, 2024 and 2023 were as follows (amounts in thousands):
Core Insolvency Total Core Insolvency Total
(1) Initial negative allowance for expected recoveries on current year purchases
The initial negative allowance for expected recoveries on current year purchases for the years ended December 31, 2024 and 2023 was as follows (amounts in thousands):
Core Insolvency Total Core Insolvency Total
The purchase price on current year purchases for the years ended December 31, 2024 and 2023 was as follows (amounts in thousands):
Core Insolvency Total Core Insolvency Total
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PRA Group, Inc.
Notes to Consolidated Financial Statements
(2) Recoveries collected and applied to Finance receivables, net
Recoveries collected and applied to Finance receivables, net for the years ended December 31, 2024 and 2023 was as follows (amounts in thousands):
Core Insolvency Total Core Insolvency Total
(a)Includes cash collections, buybacks and other cash-based adjustments.
(b)Reclassifications from Finance Receivables, net to Portfolio income based on the effective interest rate of the underlying account pools.
(3) Changes in expected recoveries
Changes in expected recoveries for the years ended December 31, 2024 and 2023 were as follows (amounts in thousands):
Core Insolvency Total Core Insolvency Total
Changes in expected recoveries for the year ended December 31, 2024 were a net positive $240.9 million, which included $156.1 million in recoveries collected in excess of forecast (cash collections overperformance), due to collections performance in both Europe and the U.S. Changes in expected future recoveries for the year ended December 31, 2024 were $84.7 million, largely due to the impact of increases to the Company's collections forecasts on its pre-2021 U.S. Core pools and certain pools in Europe. These increases were partially offset by the impact of timing related adjustments on the more recent U.S. Core pools and decreased forecasts and timing-related adjustments on certain other pools in Europe.
Changes in expected recoveries for the year ended December 31, 2023 were a net positive $29.1 million. This was comprised of $65.1 million in recoveries collected in excess of forecast (cash collections overperformance), due in large part to collections performance in Europe, and a $36.0 million negative adjustment to changes in expected future recoveries, primarily due to adjustments made in certain U.S. pools.
3. Investments:
Investments consisted of the following as of December 31, 2024 and 2023 (amounts in thousands):
Debt securities
Equity securities
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PRA Group, Inc.
Notes to Consolidated Financial Statements
Debt Securities
Government securities: As of December 31, 2024, the Company's available-for-sale debt securities consisted of Swedish treasury securities maturing within one year. As of December 31, 2024 and 2023, the amortized cost and fair value of these investments were as follows (amounts in thousands):
Amortized Cost Gross Unrealized Gains Aggregate Fair Value
Available-for-sale
Amortized Cost Gross Unrealized Gains Aggregate Fair Value
Available-for-sale
Equity Method Investment
The Company has an 11.7% interest in RCB Investimentos S.A. ("RCB"), a servicing company for nonperforming loans in Brazil. On January 2, 2025, the Company exercised its right to sell its interest in RCB. Refer to Note 17 for additional information.
4. Goodwill:
The Company performs an annual review of goodwill as of October 1 of each year, or more frequently if indicators of impairment exist. The Company performed its annual review of goodwill as of October 1, 2024, and concluded that goodwill was not impaired. Changes in goodwill for the years ended December 31, 2024 and 2023, were as follows (amounts in thousands):
5. Leases:
The components of lease expense for the years ended December 31, 2024 and 2023, were as follows (amounts in thousands):
Sublease income (7) (317)
Supplemental cash flow information and non-cash activity related to leases for the years ended December 31, 2024 and 2023, were as follows (amounts in thousands):
(1)Includes the impact of new leases as well as remeasurements and modifications of existing leases.
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PRA Group, Inc.
Notes to Consolidated Financial Statements
Lease term and discount rate information related to operating leases were as follows:
Weighted-average remaining lease term (years) 6.6 7.4
Weighted-average discount rate 4.7 % 4.7 %
Maturities of lease liabilities as of December 31, 2024, were as follows for the years ending December 31, (amounts in thousands):
Operating Leases
Total lease payments 42,632
Less: imputed interest (6,195)
Total present value of lease liabilities $ 36,437
6. Property and Equipment, net:
Property and equipment, net consisted of the following as of December 31, 2024 and 2023 (amounts in thousands):
Depreciation expense related to property and equipment for the years ended December 31, 2024, 2023 and 2022 was $10.6 million, $13.1 million and $14.9 million, respectively. During the year ended December 31, 2023, the Company recorded an impairment charge of $5.2 million related to Building and improvements. Refer to Note 9 for additional information.
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PRA Group, Inc.
Notes to Consolidated Financial Statements
7. Borrowings:
Borrowings consisted of the following as of December 31, 2024 and 2023 (amounts in thousands):
Unamortized debt premium and issuance costs, net (10,920) (11,945)
The following principal payments are due on the Company's borrowings as of December 31, 2024, for the years ending December 31, (amounts in thousands):
The Company was in compliance with the covenants of its financing arrangements as of December 31, 2024.
North American revolving credit facility and term loan
On October 28, 2024, the Company entered into the second amendment of its North American revolving credit facility and term loan to, among other things, extend the maturity date from July 30, 2026 to October 28, 2029, increase the aggregate revolving and term loan commitments by $40.1 million to $1.548 billion, reduce the U.S. domestic revolving credit facility from $1.0 billion to $950.0 million, increase the Canadian revolving credit facility from $75.0 million to $125.0 million, increase the term loan from $432.5 million to $472.6 million and modify certain financial covenants.
The total credit facility includes an aggregate principal amount of $1.545 billion (subject to compliance with a borrowing base and applicable debt covenants), which consists of (i) a fully-funded $470.1 million term loan, (ii) a $950.0 million domestic revolving credit facility, and (iii) a $125.0 million Canadian revolving credit facility. The facility includes an accordion feature allowing for up to $500.0 million in potential additional commitments and also provides for up to $25.0 million of letters of credit and a $25.0 million swingline loan sub-limit that would reduce the amounts available for borrowing. The term and revolving loans accrue interest, at the option of the Company, at either the base rate, Canadian prime pate, Canadian Overnight Repo Rate Average ("CORRA") or Secured Overnight Financing Rate ("SOFR"), for the applicable term. All borrowings incur an additional facility margin of 2.25%, or 2.00% if the consolidated senior secured leverage ratio is less than or equal to 1.60 to 1.0. The revolving loans within the credit facilities are subject to a 0% floor, or, for Canadian prime rate loans, a 1.00% floor. The revolving credit facilities also bear an unused line fee of 0.35% per annum, or 0.30% if the consolidated senior secured leverage ratio is less than or equal to 1.60 to 1.0, payable quarterly in arrears. The facility matures on October 28, 2029, and as of December 31, 2024, total availability was $555.5 million, comprised of $278.5 million based on current ERC and subject to debt covenants, and $277.0 million of additional availability subject to borrowing base and debt covenants, including advance rates.
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PRA Group, Inc.
Notes to Consolidated Financial Statements
Borrowings under the facility are guaranteed by the Company's U.S. and Canadian subsidiaries (provided that the Canadian subsidiaries only guarantee borrowings under the Canadian revolving credit facility) and are secured by a first priority lien on substantially all of the Company's assets. The facility contains events of default and restrictive covenants, including the following: